Life cycle of an oil field

Crude oil forms and accumulates

Time: Hundreds of millions of years ago

Crude oil is formed from organic matter that has been buried, for example at the bottom of the ocean, and encased in clay, sand and crumbled rock. Different strata are thereby formed. When these strata are placed under high pressure and heat, crude oil and natural gas form.

The mixture of crude oil, natural gas and saltwater very slowly migrates through porous layers of rock. This migration takes place over thousands of years. Where impenetrable layers prevent the mixture from getting any further, it accumulates in the porous sandstone and limestone layers in the bedrock.

An oil company is given permission to explore

Status of reserves and resources: –Licence: Exploration licence Time: now

An oil company is given permission to explore, in other words to look for oil, by the oil authority in the country concerned. The authority gives companies permission by awarding exploration licences within what are known as licence rounds. Alternatively, the company may acquire licences or licence shares from other oil companies. Such acquisitions must be approved by the country’s authorities. One oil company is appointed as operator of an exploration licence and is responsible for running the operations. Other part-owners act as partners in the licence.

Geological surveys

Looking for oil is a complicated process. Firstly, geological and geophysical maps and models of an area are prepared using methods such as seismic surveys. A large number of measuring instruments are placed out on the surface of the ocean or land and an explosive charge is then detonated. The time taken for the explosion’s sound waves to be reflected back to the measuring instruments tells us how the bedrock is structured and whether there are types of rock that could contain oil and gas. Another method is based on measuring magnetic fields. Diagrams and maps are then analysed by geologists. Often many investigations are required to pinpoint a possible oil discovery.

Exploration drilling

Exploration drilling is carried out in areas where oil may be present. First an appraisal well is drilled, which can take around one and a half to three months depending on factors such as the type of rock. Samples are analysed continually during the drilling. If oil or gas are discovered the company drills fringe wells to determine the extent of the reservoir. Data from the drilling is analysed and calculations made of the volume of oil that the accumulation contains and whether it is commercially worthwhile to develop a field for production. It may take between four and ten years from the time oil is discovered until a field begins production – sometimes longer. Once a company has proven an oil discovery it may define the oil found as contingent resources.

Production and development plan

Status of reserves and resources: ReservesLicence: Development licence Time: approx. 1 year

Once an operator and its partners have together decided to develop a field, a production and development plan is drawn up. A field must be capable of producing for many years and in times of low oil prices. The oil company therefore looks for development and operating solutions that reduce the costs of this. Floating production units, reuse of installations and subsea solutions that contribute to lowering costs result in better profitability and thus increase opportunities to develop minor oil discoveries. The country’s authorities must approve the production and development plan. Once approved, a development licence is granted. Once a decision has been made to develop the field the oil in the field may be defined as reserves.

Development of the field

Status of reserves and resources: ReservesLicence: Development licence Time: approx. 1–7 years

Before the oil field is developed, materials and services must be procured and everything then has to be installed. A system for transporting the oil produced must also be built. This work may be carried out by the company’s own personnel or by external contractors. Production wells may be drilled both vertically and horizontally. Up to 40 wells may therefore cover an area of more than 10 kilometres out from a production facility. Once drilling is complete, the facility is test-run and fine-tuned to achieve a stable production level. It takes around a year to develop an onshore oil field and around 3–7 years for offshore facilities, depending on the size of the field.

Production and sales

Status of reserves and resources: ReservesLicence: Production licence Time: approx. 10–30 years

When a field has been taken into production, the production is normally ramped up for a short period of time and then the peak production level is reached. The company can usually maintain this level for a period before production naturally starts to decline. This is called the field's natural decline which continues until the field is closed down due to low production. When production tails off, one measure can be to drill injection wells and inject water or gas into the reservoir to raise the pressure, or to install pumping equipment. A more long-term measure may be to drill new production wells in nearby oil reservoirs and connect these to the production facility. This is a way of prolonging the field's production life cycle.

The oil is transported from the oil field to shipping ports where the oil is stored in oil cisterns until it is collected by a customer.

Closedown of the oil field

Status of reserves and resources: –Licence: – Time: approx. 1 year

Once an oil field no longer contains sufficient oil to justify its continued operation the oil company is obliged to fill in the wells, dismantle and remove all equipment from the site and restore the area if necessary. The licence is then returned to the authorities.

PA Resources ABis an international oil and gas group which conducts exploration, development and production of oil and gas assets. The Group operates in Tunisia, Republic of Congo (Brazzaville), Equatorial Guinea, United Kingdom, Denmark, Netherlands and Germany. PA Resources has oil production in West and North Africa. The parent company is located in Stockholm, Sweden and the share is listed on NASDAQ OMX in Stockholm.